How to Make Things Faster

Chapter 87. Are Ratios Useless?

Are all ratios just fundamentally unreliable? Are they useless? If they are, then what are you supposed to look at instead? What metrics should you use to drive your feedback loop?

The short answer is, ratios are not useless, but any time you see one, you need to regard it with suspicion. When you see a ratio improve, dig into the numerator and the denominator to find out whether it improved for a reason that’s good for your system.

Too much trust in ratios makes you susceptible to evil genie shenanigans. As I showed in the Oracle and mpg stories, following even perfectly sensible ratios can lead to bad decisions. There’s no evil intent required. The evil genie metaphor is just a device for showing you that if you’re not careful about what you ask for, you might not get what you want.

So, when can you rely on a ratio for decision making? My advice is to look at the numbers that make up a ratio before you look at the ratio’s value itself. Unless you can see the values that make up a ratio, you can’t trust it. One of my favorite authors, the late Clayton Christensen, said, “I’ve never seen a bank that accepts deposits in ratios.”

Don’t rely solely on ratios for decision making.